Construction halted in Korea as housing glut persists

Industry

Published: 07 Feb. 2023, 17:56

Construction halted in Korea as housing glut persists

Housing units up for sale sit vacant as sales demand plummets, sending a red alert to related industries nationwide, such as in construction, maintenance and local government outside of Seoul. A photo above shows apartment complexes in Seoul under construction. [YONHAP]

Construction projects are being delayed or halted as the market is replete with unsold units.

In December, 68,000 were awaiting buyers, up 10,000 from the previous month, according to the stry of Land, Infrastructure and Transport on Jan. 31. Outside of Seoul, the total was up 19.8 percent. In the city, the number increased 6.4 percent.

This is the first time in seven years the number of unsold units exceeded 60,000, last being in 2015’s 62,000 units.

“For regional areas, we can’t even properly schedule when the units will go up for sale because people are worried that the properties won’t sell,” said a worker from a construction company. “We are at a loss about what to do — we can’t just postpone the schedule due to financing and other associated costs.”

The number of apartment units for sale nationwide in January was 25 percent of the total estimate, according Zigbang on Monday. The expected number was 5,806, but the actual number turned out to be 1,461 units.

A total of 9,924 units are for sale this month, down 46 percent from 18,283 in February 2022.

“The housing supply needs to be controlled as interest rates rises, housing price falls and new towns put their units up for sale,” National Assembly Research Service commented in recently released data.

The market slump is particular bad outside of Seoul.

On Monday, Daewoo E&C gave up construction rights for a high-rise residential building in Dong District, Ulsan, due to weak business prospects and worries over lack of housing demand.

Due to rising interest rates and falling demand, Daewoo E&C walked away from the project, paying off financing already raised with its own funds.

The Daegu government is blocking the housing business altogether until the market stabilizes.

At the end of last year, the excess housing supply in Daegu was 13,445 units, 19.4 percent of the total 66,107 units.

“The government will halt the approvals to build up new houses until the market stabilizes,” Daegu government said on Jan. 30.

The local government is also attempting to control the supply by asking pre-approved districts to postpone the schedule in which they put up their units in the market or to transfer them to leases.

“Local governments are controlling the housing sales flow in regions such as Daegu due to the excess supply,” said Ham Young-jin, head of the big data lab of Zigbang. “The housing market is not looking bright, and majority of expected housing units for sale may not even be sold or leased.”

BY KIM WON, LEE JAE-LIM [lee.jaelim@joongang.co.kr]